Friday, February 09, 2007

Sales Agents for Mica Condos Promoting Toxic Mortgages

-----Ad for Mica Condos in Silver Spring, MD-----

Own at MICA for Less Than You Think--and Nothing Down!*

The best value in urban living is well within reach. In fact, it's right here at MICA. Now you can own a sunny, spacious one-bedroom MICA condominium for only $1,315.20** a month--with NO down payment. It sure beats renting!

Base Price $304,900

First Mortgage $762.25
Other Financing $374.71
Real Estate Taxes $254.08
Condo Fee $392
Estimated Monthly Tax Savings ($500)
____________
Total Monthly Payment $1,315.20**

**Terms and Conditions: Based on a sales price of $304,900; no down payment required. First-year payment quoted based on interest-only first trust for 60 months with a 2/1 temporary buydown off the note rate of 5.75%: first year, $762.25; second year, $965.52; years 3-5, $1168.78; interest-only second trust, $374.71 (note rate of 7.375%); property taxes, $254.08; condo fee, $392.00; total monthly payment for first year, $1,783.04; estimated monthly tax savings, $500.00; net monthly payment after tax savings, $1,315.20. Net monthly tax savings based on a 28% tax bracket. First trust APR, 8.356%. Limited offer, valid only for qualified buyers purchasing a primary residence. Prices, taxes and terms subject to change without notice. Please see sales manager or on-site loan officer for details.

71 comments:

  1. How is this legal? I thought indentured servitude was outlawed by the 13th Amendment.

    :)

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  2. David, Perhaps this arrangement might be "toxic" for you, but for most first time buyers it is more than workable. You said you were something like 26, right? Assuming you've been in the workforce for something like 4 years now, haven't you already experienced significant raises? And looking down the road another 4 years, don't you expect your salary to rise quite a bit ... either by staying where you are at or changing job? (A recent study showed where job holders aged 22 - 35 changed jobs on average ever 18 months.) The agent here has done the legwork for buyers who might not otherwise know enough about finances to come up with their own strategies for buying. How is that a bad thing? Read the terms ...everything is laid out in there ... including how much it will escalate and when. Only a really ignorant buyer (or more likely one with his/her head in the sand) would ignore reading the terms where everything is laid out. And obviously you have read them and understand them otherwise you wouldn't be unhappy that payments WILL go up over time. And I think that is the root of your problem and that of other BHs. You just don't like the fact that things cost more than you would like them to. Well, that's just tough luck. The agent who took the time to come up with a strategy for helping you deal with reality isn't the cause of prices being high ... BUT is part of the solution for dealing with it if you so choose. You can sit around complaining till the cows come home, but as it should be obvious to you by now there is no bubble and your feigned expressions of injustice are running thin as it becomes obvious to all that it is not an expression of injustice but rather a selfish self-interest coming through. In brief stop blaming others for your own self-perceived inability to buy a place you like. And I do emphasize "self-perceived". Admirable people like this agent are laying out a roadmap for you to deal with the realities of the real estate market and it is YOU looking a gift horse in the mouth and laying blame there rather than your own unwillingness to just pay what things cost. Sorry, but I have stopped feeling sorry for you as you have continued to blame others for your own problems rather than just dealing with them ... Especially now that it has to be very obvious to you and everyone else that the US economy is NOT tanking and there won't be the gloom and doom you predicted that is needed to cause the firesale prices you are unrealistically hoping to buy for. Sorry, but like the rest of us at your age, you are just going to have to suck it up and pay what the market is demanding ... Or just watch the years waste away as you become a jaded and bitter "forever renter" like Robert ... forever putting your life on hold. Please take this as "tough love" ... 'Cause I'd hate to see you become another Robert ... and I really hope you come to your senses. Good Luck.

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  3. I just received an email from a real estate agent listing the new properties that have come on the market in the last seven days. In DC, 113 condos have been listed in the last seven days. Another 87 in Montgomery County. Here are the numbers for the region:

    Washington, DC (113):
    Arlington (18):
    Falls Church (14):
    McLean/Tysons/Vienna (11):
    Alexandria City (16):
    Alexandria, Fairfax County (16):
    Annandale (18):
    Fairfax County (outside Beltway) (38):
    Loudoun County (13):
    Prince William County/Manassas (27):
    Montgomery County (87):
    Prince George’s County (45):

    Seems like a lot, don't you think?

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  4. In addition to the 113 condos, 164 coops and 130 single family homes and townhouses also came on the market in the last seven days in DC.

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  5. Dyarr, Lance, I think you're crazy. You have that huge rant which is big on rhetoric and small on charm, and then you end with silliness like this:
    "Sorry, but like the rest of us at your age, you are just going to have to suck it up and pay what the market is demanding."

    I think you're wrong. I think "the rest of" you are going to ensure plenty of available property at cut rates from the banks desperate to unload them after you default. "The rest of" you who have "sucked it up" will have gotten yourself into payment situations you can't afford.

    I really hope you come to your senses.

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  6. Lance, us poor folks see right thru the scam you rich folks (and folks who profit off the transactions, i.e. realtors, brokers) are trying to pull on us. the gig is up. we're not buying anymore and signing up to the neg am scam. cut the prices and we'll think about it... too much rental inventory to have to worry about being priced out forever for at least the next 5 years. thanks Developers!

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  7. Oh, wow, I just looked through some previous posts and realized what a one-dimensional troll Lance is. Man, I feel silly for acknowledging that diatribe.

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  8. Wow, Lance. I had no idea you had so much invested (time? money? emotional well-being?) in the real estate industrial complex.

    The fact of the matter is: in this market (that is, flat or falling), if you cannot afford a fixed mortgage with a healthy downpayment, you probably shouldn't be buying it.

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  9. Great stuff. Continue to post this. Anyone who has seen MICA from the outside knows those places simply aren't worth $300k for a one bedroom. Come on people.

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  10. Lance said...
    “You said you were something like 26, right? Assuming you've been in the workforce for something like 4 years now, haven't you already experienced significant raises?”

    Salaries have risen in step with housing prices? Please “Lance”, post a link indicating such.

    “Or just watch the years waste away as you become a jaded and bitter "forever renter" like Robert ... forever putting your life on hold. Please take this as "tough love" ... 'Cause I'd hate to see you become another Robert ... and I really hope you come to your senses.”

    Sorry “Lance”, since you’re new to the blog, you may not know that I sold in 05’. Given that there are double digit increases in foreclosures, inventory, and triple digit increases in Days on Market (DOM) I don’t think I’ll be a “forever renter”.

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  11. Don't feed the troll.

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  12. As someone who liked Mica, and would like to live there, but can't afford it, I would like to point out a few things to Lance -

    Base price on a lot of those units that they're quoting is higher than 304,900. That's their smallest one bedroom. They're quoting $325,000 or more for bigger units. And they don't even have a model of the small one bedroom.

    Two, that payment is after tax savings. However, you still need to front it. So it's essentially saying - can you afford to put four hundred a month on your credit card in the hopes of being able to pay it all off in April?

    3 - assuming you're going to make more in four years is a good thing. Counting on a certain percentage raise is nuts. You may transfer jobs, you may transfer careers, you may suck at your job and they won't give you that much of a raise. Never buy more house than you can afford at the time you buy it, assume your income is going to go on as is in perpetuity.

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  13. Anyone who has seen MICA from the outside knows those places simply aren't worth $300k for a one bedroom.

    And this is the main point. It's not that I can't afford a $300K dollar MICA condo; it's that I don't think the condo is worth that much.

    But if you want a subprime loan, you better get one quick. Because the subprime market is tanking fast, and they are going to be much more difficult to find in a couple of years.

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  14. David:

    Here are MRIS statistics for January. The Capitol Hill zipcodes are seeing major price drops.

    20002, 20003

    http://www.mris.com/reports/stats/

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  15. Lance Said...

    David, Perhaps this arrangement might be "toxic" for you, but for most first time buyers it is more than workable. You said you were something like 26, right? Assuming you've been in the workforce for something like 4 years now, haven't you already experienced significant raises? And looking down the road another 4 years, don't you expect your salary to rise quite a bit ... either by staying where you are at or changing job?


    Lance, what this ignores completely is normal risk. How many peolpe between the ages of 26 and 30 have experienced a professional setback? Maybe even a period of out-of-work? The typical worker in that age group does not increase their salary as significantly as you say. There are exceptional people (and I would surmise that many on this board are exceptional people), but for the average, run of the mill employee, it doesn't work. I know because I manage these average, run of the mill employees. It might not be everybody, but it's probably at least 50%. This risk is compounded with a risk of a mild downturn, recession, or whatever you can imagine on the full spectrum. Even in the dot-com boom of yesteryear, several of my friends' companies suddenly imploded and they were required to seek new employment which took 6 months or more. Most people in this age group do not have the savings to handle those kinds of setbacks, which is why people in that age group typically rented until their savings could handle the risk of daily life. The truth in advertising has been extended to investments in the form of safe harbor disclosures. The same thing should be required for housing, it is, after all an investment.

    If you're arguing that housing is priced to absolute perfection in a perfect world, I think even the most hardcore bubble believer would at least hear you out. The fact that you're blind to the risk makes you naiive at best, and a danger to yourself and others. I don't know you, but I hope for the sake of those around you that you are not someone with a fiduciary responsibility.

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  16. Remember, it's always a good time for a parasite to feed on the blood of the innocent. At least that's what the NAR tells me!

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  17. Uh...Lance...didn't you post a "Goodbye Cruel World" message a month ago?

    That didn't last long.

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  18. Forthcoming events easy to predict:
    1- Subprime lenders tank
    2- Lereah predicts bottom
    3- Pool of buyers [suckers] dry up
    4- Lereah predicts bottom
    5- Sea of foreclosures
    6- Lereah predicts bottom
    7- Sellers forced to get clue
    8- Lereah predicts bottom
    9- Prices back in line with incomes
    10- Lereah predicts bottom (he's finally right!)
    11- Then I buy.

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  19. Lance said -
    "it should be obvious to you by now there is no bubble"..

    Tell that to my cousin who is about to go into foreclosure bc he couldn't maintain the house he bought at the peak (he's not an investor but not smart enuf to realize the risks and responsibilities) but now couldn't sell it to break even nor rent it out (houses after houses for sale in his area and for rent). Foreclosure rate jumped 70% in the greater DC area last year from the year before.. Go ahead and keep yammering about non-existent of bubble.. Lance didn't you say you are not posting anymore? Frankly I'm tired of reading your drivels.

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  20. Anon 10:48 said:
    "Two, that payment is after tax savings. However, you still need to front it."

    FALSE statement. Get thee to a tax advisor ... or just read the instructions for filling out your w-2 form. (I.e., you can "elect" to not pay the taxes that will be returned to you anyways ... It's called raising your exemptions ... The formula for figuring out how many extra exemptions to claim for your mortgage interest and property tax savings is on the back of the form ... ) You're proving once again that many BHs are BHs because they don't know the facts.

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  21. anon 10:48 said:
    "assume your income is going to go on as is in perpetuity."

    yes, make that assumption and that is exactly where you will stay. That is a "poor person's mentality" (i.e., it ENSURES you'll never succeed.) You need to challenge yourself instead if you want to get anywhere. It's not doing the things we know we CAN do that gets us anywhere, it's attempting to do those things we don't know how to do that get us somewhere. Why? Simple ... Need is the impetus to change. You have a mortgage increases to face? You'll think about that each and every day and you'll work harder and smarter to achieve your goals. If instead you just content yourself with what you have, that's all you'll ever have ... at most. You won't even know what hit you when your motivated competition runs you over in their drive to succeed. Being fat and happy won't help you much when this happens.

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  22. mojo said:
    "But if you want a subprime loan, you better get one quick. Because the subprime market is tanking fast, and they are going to be much more difficult to find in a couple of years."

    It sounds like you don't know what a subprime loan is. It's NOT the financing described in Mica ad David quoted. THAT is prime financing. Subprime loans are high interest loans doled out to high risk individual. The term subprime has nothing to do with whether it is a first or second loan, an ARM or an interest only or any other set of terms for a loan. It is simply a high interest loan for a high risk individual. For example, it could be a 30 yr fixed interest rate loan requiring 20% down ... BUT at a rate of 12% when the going rate is 6 1/2%. Again, another BH proving that as a group most BHs do NOT understand real estate or real estate financing ... or even the direction the US economy is headed in for that matter ...

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  23. After reading that, I, too am convinced that Lance is nothing more than a troll. It was full of inflamatory statements intended to get a rise out of people. If you read it with that in mind, it is actually quite obvious.

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  24. to whoever said
    "Sorry “Lance”, since you’re new to the blog, "

    I've been reading this blog for over a year & Lance has been here for that whole time. Lance is many things. One-sided? sure. Defensive of agressive REIC marketing campaigns? always.
    But "new to the blog" he is not.

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  25. Guys! Guys! The point is this: If you have money you can buy. If you don't have enough money keep on renting. All this talk about bubble...no bubble.....will it burst....will it deflateiiis becoming silly...very silly...

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  26. and more importantly, DC-metro MRIS stats are out. David always does a nice summary... so have at it David.

    Here's some things that I noticed for the District.

    1) For the first time since September 2005, the YOY change in monthly units sold increased by 18%. However, the YOY change in the number of active listings also increased in January by 20%.

    I'm sure we'll be hearing about a "bottom" from Lereah any day now...

    2) YOY mean (-3.9%) and median (-3.7%) prices continue to fall

    3) The ratio of current listings sold to active listings (at 5.19) is about the same as a year ago. From historical data that I have seen, as long as this number is above 3, prices will increase at a rate slower than inflation.

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  27. Lance, you are an absolute idiot. Check the facts - incomes have not kept pace with housing price appreciation in the past 3 years. Why should someone assume an increase in salary when jobs are being off-shored to lower cost providers every day, and recent history suggests pay increases that aren't keeping up with real inflation?

    I personally sold EVERY piece of property except for our primary residence between 2003-2006. 3 rentals and vacant land. Every buyer was stretching it to get in - to the point that one needed another paycheck to make settlement and delayed a week. So much for the bitter renter theory. These buyers were unqualified hacks who stumbled onto easy financing.

    Look folks - you want a nice place to buy? WAIT! There will be plenty of foreclosed property owned by realtors, mortgage brokers, and developers in the upcoming year. What better way to say I told you so? I purchased the lot for my last house from the bank who twice took it back from two separate developers. Felt good knowing I paid 50% of what the last developer paid. It happens, has happened, and will be happening a lot in the upcoming year. Patience will be rewarded with savings.

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  28. What happened to the crab feast?

    A Redskins fan

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  29. It's a new paradigm, and everybody who doesn't buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

    Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

    This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent.

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  30. Lance, It looks like Caveat Emptor has been giving you a verbal pounding. Just stay down, those right hooks keep coming.

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  31. Sub-prime lending
    From Wikipedia, the free encyclopedia


    Sub-prime lending can be defined as lending to borrowers who have less than ideal credit. Such borrowers will pay a higher interest rate due to their increased risk of not repaying loans, based on credit history, low income, or other criteria used by lenders. During economic booms, sub-prime borrowers often can borrow more easily than they can at other times, as lenders chase higher yields in search of higher profit margins. When the boom is over, these loans tend to default at much higher rates than prime loans, and lenders again become wary of lending to sub-prime borrowers.

    So, what does sub-prime lending have to do with ARMs, Interest Onlys, etc? Nothig at akk

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  32. sc in dc said...
    “to whoever said
    "Sorry “Lance”, since you’re new to the blog, "

    I've been reading this blog for over a year & Lance has been here for that whole time. Lance is many things. One-sided? sure. Defensive of agressive REIC marketing campaigns? always.
    But "new to the blog" he is not.”

    Wait just a gosh darn minute here…… You mean to tell me that after the long winded diatribe and explaining he was through with this blog (along with Va_) this is the same “Lance” that we’ve become accustom to ? The one that says:

    Lance said...
    “In brief, if you are looking to buy a home, the thought of resale value shouldn't even cross your mind…..”

    Lance said...
    “that is correct, there is never a bad time to buy”
    July 28, 2006 3:14 PM

    Lance said...
    whitetower said:
    "So, you are saying that a person who has a mortgage should ignore the total amount paid for his house?"

    now you're getting it! yes, yes, and yes. It is the present value and cashflow characteristics of the stream of payments that you will be making that counts.
    July 25, 2006 11:09 PM

    Lance said...
    robert said:
    "Please, enlighten us with any data that shows trends of sales increase, an inventory decrease, a reduction in foreclosures, and/or a reduction in the number of ARM’s resetting."

    “ ……….I and others have gone round and round with you explaining why they mean NOTHING ... absolutely NOTHING ... but yet you persist ... and I am not playing this game with you.”
    July 21, 2006 9:09 AM

    Is this “Lance” one in the same??!!!

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  33. Yeah, same lance... but don't forget... he has exceptional "abilities."

    What those are I can only guess... but they sure aren't related in any way to real estate.

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  34. How much is a comparable one bedroom in Silver Spring going for? Lets say $1300. Using the 120x rent rule of thumb for purchase thats $156,000! Oh but this is Silver Spring, the cosmopolitan, metropolitan, up and coming satellite 'burb of the Center of the Known Universe Washington DC! It's always different here!

    I'll wait till 2011.

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  35. "Lets say $1300. Using the 120x rent rule of thumb for purchase thats $156,000!"

    I'd say that's the problem with rules of thumb. They're alright on average, but if you're not in the average situation, then the rules of thumb are misleading.

    Interest rates are very low by historical standards, so I'd say buying at these rates would be an alright decision at 200* rent. If you get a good fixed rate loan, assuming a 3% annual growth in rents, you're either saving money on rent in the long run or you've got a nice positive cash flow property in a few years, even if rates later increase and prices fall. And I personally believe rents in that area will grow faster than 3% over the long run.

    200* rent would put these condos at 260. So there's a ways to fall, but not as much as some people are saying. And something tells me these condos will be down to 260 soon enough...

    You might be able to buy for less than that later, but I don't think you'd go wrong buying them at 250-260, as long as you get a good interest rate.

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  36. For the new visitors, here is some context for Lance's statements: he bought a $900k place in NW DC in summer 2005 at the height of the bubble. He is also indicated before that he is much closer to retirement age than David is.

    He is looking at paying down an enormous mortgage well into his retirement years unless the market returns to the boom phase and he can unload his property for more than he paid. (And as an aside to Lance, in a personal data point, I know someone who recently sold a 3BR rowhouse in Dupont for roughly break even, despite having purchased it in 04, so yes even the "premium areas" are suffering under this downturn).

    Obviously his continued presence here, despite his previous statement about leaving, is indicative of the difficulties he is having in assimilating the undeniable facts in front of him: the DC market is slowly but steadily dissipating, and will continue to do so for quite a while. He is what is known as the Bag Holder.

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  37. Ken Harvey's article on the shrinking down payments among first time homebuyers from this weekends WaPo
    http://www.washingtonpost.com/wp-dyn/content/article/2007/02/09/AR2007020900076.html

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  38. As an aside, until recently I lived in a one bedroom at the Blairs, right across the street from the Mica building. My rent was $1450.00/month, so using the "multiply by 200" rule mentioned above the target price for a 1 BR should be about $290,000, which is almost what the Micas are asking.

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  39. What is this convoluted nonsense about about "using the rule of 120x rent," to conclude that a one bedroom condominium in Silver Spring priced at $290,000 is normal? Why not a rule that says that 1,000x rent is O.K. to conclude that the condomium actually is underpriced?

    We are not talking about purchasing a single family home. We are talking about purchasing only the inner area of a building. To this, we have to add monthly maintenance fees that, in some instances, approach the price of renting a comparable one bedroom apartment.

    I remember a phrase told to me thirty years ago by an experienced real estate attorney: "Buying a condominium is buying the right to pay rent." Years ago, it might have made sense to purchase a one bedroom condominium in Silver Spring for $50,000, with a monthly maintenance fee of $150.00. It sure as hell makes no sense to purchase a one bedroom condominium in Silver Spring for five times that amount, together with condominium with exhorbitant maintenance fees.

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  40. I just had to post here because I live in the area and looked at the MICA place sometime last year. MICA was at the center of my "am I crazy or is everyone else?" moment regarding the housing bubble. Backstory: I have been renting in SS for years and, somewhat consequently, miserable. I looked at MICA last year when they were really marketing themselves locally. I had co-workers, family, friends, and sibling all pushing me to buy, but I secretly harbored real suspicions about how far this housing bubble had gone. I looked at MICA and remember thinking to myself, no matter how much they gentrify this neighborhood, I just cannot fathom paying $325k for a condominium in Silver Spring. Shucks, I couldn't imagine paying $225 for a condo here. Man, am I glad I didn't take the plunge. I feel sorry for anyone who did buy in MICA at the peak, because they are going to be holding that condo for a decade before anyone is going to offer them what they paid.

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  41. Ouch that condo fee is almost 1/3 of the rent on my 1 bedroom apartment. Is there any estimate on how much you should add to the price for condo fees to find out how much you are really paying for the property?

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  42. Anon said:
    "I feel sorry for anyone who did buy in MICA at the peak, because they are going to be holding that condo for a decade before anyone is going to offer them what they paid."

    And you in the meantime will continue throwing your money down the toilet each and every month. You'll have NOTHING to show EVER! Now, who's smarter ... you or the person who bought the place last year that an "intelligent you" would have bought?

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  43. "And you in the meantime will continue throwing your money down the toilet each and every month. You'll have NOTHING to show EVER!"

    Someone who bought the condo for too much and has seen its value fall threw their money down the toilet. The person who rented and saved that money has quite a bit more to show for their wisdom. And the person who comes here and screams in all caps shows that they're really emotionally melting down.

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  44. "You'll have NOTHING to show EVER"

    Hmmm, let's say you bought Yugo for $44,999 and I didn't. You really can show it and I can't - I put my 45K in Gold and Foreign stok. Yaeh, show me your Yugo...

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  45. anon asked: "Is there any estimate on how much you should add to the price for condo fees to find out how much you are really paying for the property?"

    Yes: Zero ... Condo fees are intended to pay maintenance and operating costs as well as capital improvements of the common areas. For example, they cover paying your custodian, the electricity to run the elevators and the A/C, the water, making repairs (of common areas) and replacing your roof when needed. They are all fees that if you were in a single family home you'd be covering yourself singly rather than in common.

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  46. Lance said...
    “And you in the meantime will continue throwing your money down the toilet each and every month. You'll have NOTHING to show EVER! Now, who's smarter ... you or the person who bought the place last year that an "intelligent you" would have bought?”

    Currently, me. I’ve shown better gains in a simple bank account than the person who bought last year.

    Furthermore, even if I gain nothing more financially, in the very least I’ll have many more homes to choose from this spring; making my choice to purchase based on what I want in a home, not based on a “must buy now” mentality.

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  47. Lance said . .
    "Yes: Zero ... Condo fees are intended to pay maintenance and operating costs as well as capital improvements of the common areas. For example, they cover paying your custodian, the electricity to run the elevators and the A/C, the water, making repairs (of common areas) and replacing your roof when needed. "
    "They are all fees that if you were in a single family home you'd be covering yourself singly rather than in common." ---Wow what a blatant falsehood.

    WTF . . . all fees that if you were a SFH you'd pay ????? Okay there is a HUGE difference between a fee and maintenance(sic)costs etc. The condo fee would be comparable to a HOA fee--but not even comparable if you don't live in a SFH w/ a HOA.

    You are right it should be zero . . but that's only b/c I detest condo/HOA fees but that is another subject. Condo/HOA is a MANDATORY payment, you don't pay you get fined or worse . . . just like property taxes and SHOULD be calculated into the budget for what one could afford. You don't do maintenance on your house . . . well you just get to live in a dump not fined or kicked out(unless you have some Nazi HOA-excuse me sir do you have the inside of your house painted yellow that's against the regs, blah, blah).

    Tell the person that bought a 200k condo but pays 700/month in condo fees it's just for maintenance . . yeah right. Look you're paying for the opportunity to live there someone gets a kickback (maybe not blatant, but it's there).

    Condo/HOA fees vary by location sometimes they are as little as $150 a month (way too high still) or as much as $700, it really justs depends. That's where you have to do due diligence and not just sign on the dotted line. "Oh I just bought a condo for $250k and am only paying $700/month on some wacky mortage" Except they forgot to calculate the condo fees which are also $700/month.

    Shoot, lance sometimes you've got good info. But that is just bad, bad, wretched advice. Do you want someone to face foreclosure? Do you take pleasure in knowing that someone could buy a condo w/o calculating the condo fees and then get hammered? If you have changed and are a new lance, not the old one (b/c I don't see this coming out of the old lance's mouth, he would at least make it someowhat logical), how do you sleep at night basically telling them not to calculate in condo/HOA fees in what they are really paying. Don't forget condo fees don't go away, they a small rent payment. That's really what it amounts to it is a small rent payment.

    In addition to the condo/HOA fee you should add an additional maintanence costs. Condo/HOA don't pay for everything, generally they just pay for what is outside the condo/house not what is inside. I.e. your pipes break on your faucet, your condo fee ain't paying to fix that.

    For a SFH I have read approx. 150-200/month is a good estimate for repairs etc. For a condo I would imagine it would be less, I have no idea what, I would guess maybe 500-1000 a year?? And hey so you don't use the whole amount, you've budgeted it so if you haven't used the 500-1000 at the end of the year think of it as christmas money or money for upgrades who knows. The point is it's in there so if you need to use it great if not great.

    Sometimes fees are more sometimes less, but it is MANDATORY unlike my maintenance on a SFH without a HOA. Fee != maintenance costs.

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  48. It is kind of funny that they make you 10k or 20k for a parking space depending on what kind you get. However, even though you supposedly just "paid" for this parking space, you still get the bonus of paying a fee to park there. Who knows maybe this is an extra condo fee to pay for repairs on the parking space :).

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  49. Shane, the question was: ""Is there any estimate on how much you should add to the price for condo fees to find out how much you are really paying for the property?" and NOT "Do you condo fees get added in when determining if a person qualifies for a mortgage?" Of course they do and they should (i.e., since you must pay them, you need to be sure you can afford them.) But that wasn't Anony's question. They wanted to know how much condo fees added to the real price of the house. I.e., in comparing a place with a condo fee to a place without one, how do you factor in the condo fee. My answer is correct that you don't factor it in since you would likewise need to factor in the same maintenance and capital improvement costs to the non-condo fee place. Btw, it doesn't sound like you know much about how condo fees get determined and assessed. Hint: there's a budget that gets reviewed and approved by the entire membership (that's the homeowners) at their annual meetings.

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  50. And Shane, while I agree that the average condo fee is way too high, I don't believe it is because of kickbacks as you state. Not even hidden ones. The problem is more related to what often happens when you have shared goods/benefits. Unlike when people have direct responsibility for paying for themselves, people don't as easily understand the shared costs they affect by their individual actions. For example, when you have a home you pay the monthly water bill and as such you are more careful in how long you run the shower, whether you run the washer and dishwasher with full loads, etc. When water is a common expense such as in most condos, you really don't care ... since you don't tend to make the connection between being careful there and the future increases in your fees that not being careful will cause. And of course, you're going to wonder, why should I limit my showers when I know my neighbors aren't? Additionally, condos tend to pay more for repairs and the like since tradesmen view them as having "deep pockets" and the management companies who are more concerned with getting things repaired right away then in containing costs must maintain good relations with the tradesmen and as such shop around on the basis of quick and good service and not so much on price. Additionally, there is the hidden factor of the one or two nuissance owners in every building. They're the ones that feel that they want to get their money out of their condo fee and do so by insisting on repairs or improvements which aren't maybe necessary but which they will never take a no answer for. The unpaid board will often relent to the one or two owners who drive the costs up significantly. In a building where I was on the board, we had one homeowner who alone caused our legal costs to be about $5,000 a year because every decision the board made (even minor ones) was questioned by this owner and legal counsel had to be sought in each case to counter threats of being sued by this owner for the decisions. So, yes, I think one spends a more for maintenance and capital improvements when one pays for them via a condo fee than when one is directly responsible for making the decision to spend or not spend as in a Single Family house. But, these are still expenses for the most part and are comparable to expenses on a house even if they are on the higher end of the scale.

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  51. Lance said
    "But that wasn't Anony's question. They wanted to know how much condo fees added to the real price of the house. I.e., in comparing a place with a condo fee to a place without one, how do you factor in the condo fee."

    Lance I think I understand where you are coming from. If you pay 315k for a condo with a condo fee of 200/month or 300k for a condo with a 500/month fee. Regardless of which you bought the price you paid is 315k and 300k respectively (i.e. it's not added to the mortgage-nor should it).

    However, if you are doing a comparison of the two you'd darn well better factor in the condo fee in you're monthly payments. The condo fees are set numbers for a certain time period so you can easily calculate it in, and you should also calculate in other estimate maintenance costs. I.e. in some cases it would be advantagious to buy the higher priced unit b/c the condo fees are much lower than the lower priced unit.

    Part of the problem of this bubble is that people have not done a good job logically calculating their monthly costs. How can you when at the height a house was on the market and gone in less than an hour??? You mean I can buy this for 200k no down, no payments for 6 month 0%??? wow what a deal, only then a month later they realize the exorbant condo fee and rates changed etc. etc. When lots of people aren't doint due diligence it spells trouble. There will always be those idiots who don't, but when houses are going like hotcakes a lot more than your normal village idiot are not doing due diligence.

    this however . . .
    ""Do you condo fees get added in when determining if a person qualifies for a mortgage?" Of course they do and they should"

    LMBO. If you think for one minute that the past 5 years lenders have realistically been calculating what people need to cover the mortage, wow all I can say is wow. Sure I may make 70k/year but that doesn't mean I can afford a 300-350k loan. And don't tell me it didn't/doesn't happen, I have a good friend who I know didn't make more than 55-60k and got a 300k loan-WTF and he's supposed to be able to afford that???.

    Another problem people are like "oh the bank wouldn't loan me more money than what I could afford, I'm sure they know better" Yeap they sure do know better than you, b/c they know that you will go into foreclosure they will take your home and still make you pay off your debt (remember change in bankrupcy laws). Just 'cuz they WILL loan it to you doesn't mean you should take it.

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  52. Lance your post on 9:48, love it . . why communism is a utterly failed plan . . . and why I hate living in a common (communistic) place like condos :-).

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  53. Shane said:
    " How can you when at the height a house was on the market and gone in less than an hour???"

    I understand what you are saying. When I was looking, I countered that problem by having a spreadsheet handy in which I dropped the costs as applicable to the individual place I was looking at. While things may have seemed to move in an hour, in reality places would go on the market on a Thursday and offers were due in by Monday COB with the "winner" notified on Tuesday COB (or something like that.) I would prepare by starting looking at listings on line Tuesday night (when MLS updated the week's listings) and then talk to my realtor on Wednesday or Thursday to screen out properties on info only he had access to so that I'd be ready to look at the property over the following weekend and make my bid by Sunday night if I wanted it. Part of my research included pulling up on-line tax records to get the property tax to drop into my spreadsheet and to see when the property had last sold and for how much. I.e. I was prepared in the same way I'd be prepared for things related to work. When you are talking about making the biggest expense of your life, I can't understand why anyone would skimp on research and other preparation. I'm sure you are right that there were many fools who didn't do much else other than wait for the Realtor to tell them if they could afford it or not. I say they have no one to blame but themselves if they set themselves up like that. It's really a matter of personal responsibility. I'm sorry if I am sometimes harsh on the BHs but when I hear that they are sitting it out waiting for a big bang bust, I see a lack of personal responsibility. I see them waiting for someone or something to come along and give them that "affordable" house rather than their working at it themselves. And it irks me when they then go and blame others for "not helping them with their purchase" when it seems to me that they aren't even willing to help themselves ... other than through wishing bad fortune on current homeowners so that those current homeowners will sell them their homes at firesale prices. The glee they show in reporting the little bad news they find just serves to re-inforce my belief that they are not willing to do the hard work and preparation required for making this very very large purchase ... and instead just hoping to profit off the misfortunes of others.

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  54. Lance said,
    "The glee they show in reporting the little bad news they find just serves to re-inforce my belief that they are not willing to do the hard work and preparation "

    This cracks me up. First of all, all of the housing heads didn't have a problem with glee when appreciation was going on. So give us a little time to say I told you so! Second, I am certain I did more research then you and went to more open houses then you. I did it for about a year, until all of my research pointed to bad things. YOU obviously did not do enough research because Lance, you bought a depreciating asset. If you plan on living there, great. But the truth is you could have saved some serious cash if you would have waited, even in your beloved 20009 zip. Housing prices have fallen, deal with it, accept it. NO ONE here is looking for the bottom, as you claim. Everyone here appears to be doing a lot of work and research, just like you said you did. No one thinks they deserve a house or help. Every one here just want to be financially responsible... unlike you. Not ot be mean but, have fun retiring when you 70.

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  55. "When you are talking about making the biggest expense of your life, I can't understand why anyone would skimp on research and other preparation. I'm sure you are right that there were many fools who didn't do much else other than wait for the Realtor to tell them if they could afford it or not. I say they have no one to blame but themselves if they set themselves up like that. It's really a matter of personal responsibility."

    And that's what a lot of buyers here in DC did in 04-05, which explains the runup and the bust that we're currently seeing.

    Lance, you're so locked into your religion of homebuying that you fail to see the obvious: The moderate bubbleheads here are the responsible people who rationally assess things. We're the ones you'd admire if you were an honest man.

    We're the ones who looked at the market, did the math, and made the smart decision not to buy when things were overpriced.

    You yourself have claimed that somebody should buy in oder to lock in their housing costs. Well, in that case, you're condemining over half of DC homebuyers in 2005, because over half of the 2005 homebuyers used ARMS, which, by definition, do not lock in your housing costs.

    Those 2005 buyers who are currently begging us smart 2005 renters to get them out of the mess they made for themselves are the children, the ones you should be comdemning. They're the ones who are wanting others to bail them out. We smart 2005 renters are the responsible and self-reliant ones who are starting to see the fruits of our cool-headedness and responsibility in the currently falling prices.

    If you were a real man, you'd appreciate that.

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  56. Lance said . . .
    "I was prepared in the same way I'd be prepared for things related to work. When you are talking about making the biggest expense of your life, I can't understand why anyone would skimp on research and other preparation."

    I couldn't agree more, unfortunately most people didn't/won't do that. I'll give you a perfect example. Just for giggles and grins I went to an open house about a month ago. I have never bought a house, I have rented multiple places before however. For this open house, I went in looked at the cabinents, turned on faucets, I looked over the place pretty well. The realtor actually asked me and my wife if we had bought before, I said no and asked why. She told me b/c very few people actually do as good a job as I did in looking over the place. Now maybe she was feeding me a line, but if not it was quite shocking, I've never bought but I will do my own looking thankyou. Now maybe other people want to get a home inspector, that's fine, I'd do the same, but before I even THINK about buying the place I want a feel for what I am buying. Do most people do that no. . . they let their emotions ride oh this is such a cute neighborhood we want a house so bad . . . blah blah blah.

    Come on lance. There is no way one can make an educated informed logical reasonable decision to buy the biggest purchase of your life in a matter of 5 days. Not with work pressures, travel time,etc. For a normal person in DC you get home at 6 pm with traffic, do you really think that most people after a long day of work + the horrendous traffic are going to do what you did? I live 2 miles from work and the only days I can see houses are on Sat/Sun.

    Lance said . . .
    "I see them waiting for someone or something to come along and give them that "affordable" house rather than their working at it themselves."

    rant
    Now you just ticked me off with that type of BS man . . . Look lance, I unfortunately did not have the good fortune of being born 8 years earlier and graduating college in 99 so I could buy a flipping house before the bubble hit.

    I am a very independent person and when I graduated from h.s. I told my parents to not pay one more dime for me, b/c I was grown up and they had done their job, I was a responsible adult and could make it. I don't expect anyone to GIVE my jack squat.

    I worked my butt of in college to graduate from Georgia Tech w/ a 3.85 GPA. Why did I work so hard b/c I come from the belief that if you work hard you will see the rewards, like I wouldn't have to rent some dumpy POS apartment and I continue to work hard now w/ that belief.

    I came out of college making MORE than the median FAMILY salary in DC. Don't give me jack about the numbers b/c I've run the numbers with you before and you had nothing to come back with. If I had the fortune of doing the EXACT same thing but only 5 years earlier and adjusting for inflation I would have been able to afford a starting SFH in DC. Now in order to do the same my wife would have to work a full-time job pulling in as much as I do. I could possibly afford a 2 bed condo comfortably right now.

    You talk about BH just want someone to give it to them. Talk about the pot calling the kettle black. How many homeowners were gloating around the cooler, my house just went up 50%. Many (not all, but many) expect that just b/c they've lived there for 3-5 years they are ENTITLED to 100% increase. Talk about a handout and wanting something for nothing--all you did was live in your house and it is now 3-5 years OLDER.

    There are some really good people who are/will get screwed by this, they got taken in the moment, and truly I wish they hadn't. But you know what . . . downturns are actually good b/c they weed out the chaft. They streamline the process make it more efficient. A downturn in housing WILL be a good thing. Yes many people get hurt, but thru it they will become stronger, hopefully not make the same mistake do due diligence, etc. It will clean out the excess/glut.

    The problem that I (I am guessing many here have) is that the lances of the world are ALWAYS saying its a good time to buy. It was a good time 5 years ago, 10 years, 2 years, and now. They use whatever means to justify it is a good time to buy.

    Seriously lance, ask how many of us believe that one should rent their entire life. You will find very little if any saying its ALWAYS a good time to rent. It is NOT ALWAYS a good time to rent or to buy. It just depends on the situation of the market, what are the current rents and you do due diligence. . . etc.

    And I'm sorry but real estate is not that great of an investment historically long term it is inflation +1-2%.

    That doesn't mean you can't make a boat load of cash in it, it just means you can't blindly buy a place and say it's a great investment, you have to buy at the right time and when it makes financial sense. which it doesn't right now. I mean do you honestly believe that a house that went from 250k to 700k in five years will now go from 700k to 2.1 mil in 2010??? Seriously if that happens our whole economy is screwed, b/c we have just hyperinflated ourselves.

    I get really ticked at all these amateur real estate investors, just like all those dotcom investors. They think they know everything b/c they were at the right time at the right place-yes it will always go up b/c that's ALL they know. Show me someone who was in the business 20 years seen the ups and down and is now out (that so they are being honest and don't spin things, then we can talk).

    Congratulations, I'm glad you were born at least 8 years earlier than I was and caught the wave, now if you're smart you'll bail before it smashes you.
    end rant

    As far as a big bang bust, I hope it does happen b/c that means I will be able to afford something quicker, unfortunately history is not on my side that with housing bubbles they drop and then they stagnate for 5-8 years, until inflation (in the form of incomes) catch up. I honestly hope I'll be able to afford a house sooner, but I'm not holding my breath. When the benefits of owning WITH all the associated costs are better than renting I will buy (i.e. I'm not pay 50% of my income to my house), until then I rent some dirt cheap POS apartment and I save like I'm a pauper so I'll be ready when it makes sense.

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  57. Lance said...
    “I understand what you are saying. When I was looking, I countered that problem by having a spreadsheet handy in which I dropped the costs as applicable to the individual place I was looking at. ….”
    …”Part of my research included pulling up on-line tax records to get the property tax to drop into my spreadsheet and to see when the property had last sold and for how much. I.e. I was prepared in the same way I'd be prepared for things related to work…..”
    “…..I'm sorry if I am sometimes harsh on the BHs but when I hear that they are sitting it out waiting for a big bang bust, I see a lack of personal responsibility. I see them waiting for someone or something to come along and give them that "affordable" house rather than their working at it themselves. And it irks me when they then go and blame others for "not helping them with their purchase" when it seems to me that they aren't even willing to help themselves ...”

    “Lance”, for any given home I look at, I have at least 6-10 pages of data/information on that home, usually more. Tax records, A copy of the current loan and any riders, any other property the owner my have, comps for the area, ect, ect, ect.
    On top of that, a few detailed spreadsheets on the local market.
    None of this information has been provided by a realtor. Any realtor that I’ve gone to (I think I’m on my fourth) and asked for this information has had a dazed and confused look on their face. Given that, I still use a realtor in which I have a non-exclusive agreement with. I think I’ve performed my due diligence. I’m sure others are too. If not, like I’ve said before, I can’t understand why people will haggle with a salesman over a car, then walk up and pay asking on a home.

    …”The glee they show in reporting the little bad news they find just serves to re-inforce my belief that they are not willing to do the hard work and preparation required for making this very very large purchase ... and instead just hoping to profit off the misfortunes of others."

    I and others are willing and doing some hard work. And the “little bad news” is compounding daily.

    How "Lance", do you explain the decline in sales and YOY price drops?

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  58. "Now you just ticked me off with that type of BS man . . . Look lance, I unfortunately did not have the good fortune of being born 8 years earlier and graduating college in 99 so I could buy a flipping house before the bubble hit."

    I said something almost exactly the same to "lance" just a few days ago. I think a lot of us are in the same boat. I graudated college in 2004 and moved out here. At that point housing was already over priced and I wasn't about to buy something until I at least knew I liked my job. When I decided to seriously look at buying it was 2005... and it took me only a few weeks with a realtor to realize that the market was completely screwed up. We couldn't even make a list of places to go in a day or two, because they would already have 20 contracts on them by that time. So I started reading up... and found that virtually every piece of data pointed to a rapidly approaching bust.

    So yeah, if I had the same dumb luck lance did I would also be sitting in a house with a paper value somewhere north of $700k. It wouldn't be because of any good judgement, hard work, "superior abilities" or whatever else. It would be attributable to nothing more than pure dumb luck.(just like lance)

    You are also right about a bust being needed. I know people who did what lance recomends. I know people who started work at the same time as me who took out 100% mortgages using interest only ARMs just to get into a bottom end condo or townhouse. I really feel bad for them because I know they are going to be stuck in that condo for a long time. They might get married or transfered. They might have kids. They might change jobs, or lose their job... but they will be sitting in a crappy one bedroom condo with a rising payment and a loan tens of thousands of dollars more than they can sell it for.

    The bust will wipe out a bunch of speculators and amature "investors" who deserve everything they get. It will also wipe out a much larger number of normal people just trying to do the "responsible" thing and buy a house.

    In the end the market will be healthier. The banks will have learned a lesson and we will be able to look back and laugh at all the people who said "its different this time."

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  59. 20009 Zip Code:

    January 2005 Median: 406,345
    January 2006 median: 485,000
    January 2007 median: 392,500

    January 2005 average: 516K
    January 2006 average: 538K
    January 2007 average: 437K

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  60. Shane,

    What you say makes a lot of sense, except that you don't follow through on your own conclusion. You said "unfortunately history is not on my side that with housing bubbles they drop and then they stagnate for 5-8 years, until inflation (in the form of incomes) catch up." You're smart, so think that through. Based on this same belief, I came to the conclusion that one is better off locking in today's available price since the alternative is to risk all sorts of externalities that could happen between now and then including (but not limited to) higher interest rates and higher rents. And for what purpose? The price won't be lower in 5 to 8 years ... and your salary will have increased irrespective of whether you buy or not. If you really believe that prices won't drop but instead incomes will rise. What's your perceived advantage in waiting? And by the way, for the thousandth time I never said "it's always a good time to buy". As a matter of fact, the only people I ever heard saying that are bubbleheads. I've said it's never a "bad time to buy". I.e., you should never consider anytime an impossible time to buy. If you are willing to make some sacrifices, then you really can buy. For example, when I had my first condo, I brought my lunch to work for the first couple years and only ate out once a week. I made other sacrifices such as going to see family for vacations (which wasn't really a sacrifice ... but wasn't a nice warm island in January.) And as for your statement about thinking hard work will get you everything you want, I used to think that too. From observing successful people I met since then I've learned two things (1) working "smart" will get you much further than working "hard" (cleaning people are among the hardest working people I know ...) and (2) calculating risks and acting accordingly takes them farther than any work they are doing. You've done the calculation and correctly observed that prices won't fall. Why aren't you acting on that now?

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  61. Keith said"
    20009 Zip Code:
    January 2005 Median: 406,345
    January 2006 median: 485,000
    January 2007 median: 392,500
    January 2005 average: 516K
    January 2006 average: 538K
    January 2007 average: 437K "


    So lance, once again, you are wrong. You said you highly doubted that 20009 would show any decrease. AT LEAST have the integrity to admit you said that. well here you go... DROP!

    For all others, to help you understand lance. He bought with a 20/10 io loan in sometime around the peak. This is why he is so upset about the bubble. OH, one other piece of trivia, he is around 50.

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  62. Lance. . .
    Yes working hard and smart will get you a long way. I implicitly thought along those lines. For a while I worked 60+ hours at as a waiter to earn money for college. I worked hard and I earned what I needed. But shoot that wasn't the way to get ahead in life. Going to college getting a degree and then working hard with my brain will get me a lot further.

    I didn't say that prices won't drop, I said that normally they drop and then stagnant. But honestly who knows, not me, not you, no one knows. We could easily go into a housing recession like Japan for 20+ years, or people haven't had enough of the credit boom and it increase another 100% in five years. No one really knows. Which is why it is foolish to buy a house today on future expected gains or losses (unless you are an investors, which unfortunately every joe shmo now thinks he is---hey go play in commodities if you want to invest).

    What I do know is that the piper is ALWAYS paid. I have come to the conclusion that the market here was/still is crazy. Too much free money and too much gambling with homes-too much that doesn't make sense.

    I have run the numbers right now I can live a better life renting a 2 bedroom apartment than I can trying to buy a 2 bedroom apartment. When I can buy and upgrade my lifestyle at a price comparable to renting (i.e. it is more economical to rent vs. buy), believe me I will jump on that boat.

    Naysayers tell me I'm throwing away my rent and I'd be better putting it in equity in the house. The first 5 years are mostly interest--so right now I'm either throwing money to interest or rent. If I can rent for 800/month but I'd have to pay ~2000/month to buy---say with tax benefits I'd be paying 1400-1500/month. I'm still saving 700/month vs/ buying.

    I save that money for a downpayment on a house. I invest it. When one can spend <10% of their takehome on housing, why spent 50% on a house??? Save and invest, and then one day I will have enough for a downpayment, and who knows maybe 40-50% of my house and I'll be able to pay it off in 5 years. If it always stays like this with rent <<< buy, fine-but it won't. The race is won by the tortouse(sic) not the hare.

    All that stuff about scrimping and saving. I do that now. Last year alone I saved upwards of 30% of my gross--I rarely spend money on anything I don't absolutely need. I couldn't save this much and expect as big of a return on a house. I do that for long enough, why get a mortgage, I'll buy a house outright! If I have to save for 5+ years for a house, fine.

    As far as my salary increasing. Just b/c everyone else's salary increases doesn't mean mine will. Which is why I said I don't buy a house on future anticipated gains/losses vs. income-b/c that is just foolishness b/c no one knows. I buy on the here and now and what makes sense now.

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  63. Anon 5:25 said:
    " I graudated college in 2004 and moved out here. At that point housing was already over priced and I wasn't about to buy something until I at least knew I liked my job. When I decided to seriously look at buying it was 2005... and it took me only a few weeks with a realtor to realize that the market was completely screwed up."

    Sorry, it's not "the market" that screwed up, but you. Unless you have wealthy parents ready to buy a place for you, it's unrealistic to think that because you graduated college in 2004 that you should be capable of buying something grander than a "bottom end condo" (as you put it) in 2005. One year out in your career and you shouldn't even be entertaining the thought of buying. This is the period of your life when you need to be flexible location-wise for your career needs and not be worrying about mortgage payments and the like. Fortunately, your ideas about what kind of a place you were "entitled to" were so grand that you ended up not buying ... but the fact you even thought about should give you pause for your future major decisions in life. Rentals play a part in the grand scheme of things, and providing temporary shelter to people like you is one of them.

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  64. Lance said . . .
    "Sorry, it's not "the market" that screwed up, but you."

    Now I'm really confused. You're speaking out of both sides of your mouth. I am utterly confused. You get on my case for not buying now and wanting to save up money for a downpayment and rent and yet then you berat this guy for wanting to buy a condo/house?

    FYI, I graduated college in 05 @ the age of 25. I also don't recall the guy ever saying he was "entitled" to a place. I never said it either. I don't believe I'm entitled to jack, I earn it, thank you. FYI, I've never seriously considered it either . . i.e. I'm not pre-approved for a loan. In my spare time I go to these websites, look at houses, I've seen 2 places in a year. I'm familiar with things so that when the time comes I'll be more ready to strike.

    What I did think, before I got here, was that coming out of school making MORE than the med. FAMILY income here, I might be ble to afford something once I saved enough for a slush fund/emergancy and downpayment. I was married and if it was a more economical move I would have done it. I quickly realized how wrong I was. Five years ago yes, I would have, now no.

    2nd thought . . . . who exactly are all the new hires coming into DC? I don't have any numbers, but I know that in the gov. the VAST majority that I see are mid 20s 25-28. Are they ready to buy a house?. Those that have families don't want to move here.

    What do you think a guy coming out of college is to think when everything being pushed is buy now or be priced out forever? Why rent when you can buy? No down, get an ARM. Housing will appreciate 25% in the next 2 years. Regardless of whether he is ready to buy or not, he will think hmm maybe I should buy instead of renting--and many will.

    I completely agree with you that coming right out of college is really no time to buy a condo/house, but it should be a goal you set. I've set that goal and I'm getting closer ever day, however I know that I could walk up to a bank tomorrow and easily get a no down loan for a condo/house especially since I have pretty much perfect credit and low debt/income ratio.

    You proved my point of why this is nuts---just the fact that the majority think like this proves it. A good friend of mine 26-not graduated from college, making 55-60k bought a condo for 300k. How many more are like this?

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  65. Shane said:
    "You proved my point of why this is nuts---just the fact that the majority think like this proves it. A good friend of mine 26-not graduated from college, making 55-60k bought a condo for 300k. How many more are like this?"

    I don't know if you've been on this blog for a while or not, but Va_Investor and I have continually said that one should be planning to be in their home a minimum of 5 years if they are planning to buy. Now the fact that you may be let go along the way or the fact that the sky could fall in as "a la Chicken Little" shouldn't be part of that consideration. It should be your reasonable expectation of being ready and able to stay put that long because there are transactions costs in buying a home and as we are seeing also small fluctuations in price. Most everyone just starting out their career should be expecting lots of life changes in the first 5 or 10 years out. Many of these life changes include moving cities or further. As such, most just out of schoolers really shouldn't be buying. What I have tried to address are people who are in a position to buy but are holding off on the expectation that if they hold off they will somehow benefit from prices that will have fallen for real estate like what happened in the dot.com bust. As I have explained ad naseum, the parallels just aren't there between house prices and stock prices and if someone who otherwise would be buying is holding off in aniticipation of such a large magnitude price deflation, they are deluding themselves and will be waiting forever for their unearned windfall. That is all. I realize it strikes a nerve with some because they feel entitled to the type of property that today they either really can't afford ... or more likely, can't afford without sacrificing on other things. This of course doesn't apply to the just out of college crowd as I have explained. And I agree with you that the fact that there really are some people in your circumstances buying is shocking. I think this probably can be traced to the mix up we've experienced over the last 20 years or so of thinking a house is an investment and not an expense. In doing so, all the cautions associated with spending money have gone out the window AND unreasonable expectations have been created. I kinda understand how BHs can justify what they think about today's market because they're looking it as an investment ... i.e., a way of making money ... and not as a necessary expense to be minimized over time.

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  66. Shane,

    An additional thought/example pertaining to my last post. Robert sold his house a few years ago with the expectation of "making money" by renting for a few years and then buying back a similar house later at post-bubble prices. You're just out of school. Does this sound like a responsible thing for someone to do? I mean gambling with the roof over your and your family's head? THAT is the danger of this bubble talk. Expectations of quick profit take the place of rational expense minimization. Over the longrun it is always cheaper to own than to rent. Why? It's a no brainer. Someone owns that place you are renting and they have to pay to own it AND make a profit on it. It's like when you lease a car. Yes, the lower payments make you think you are getting quite the deal. But 5 or 10 years down the road you have nothing to show for it. Again, the parameter is "longterm". Something that can't be seen if you are searching for "profits" on your "investment". So what happens to Robert and his family when prices never fall to the levels he has said would convince him it was time to buy again. (for example, $140,000 for a one-bedroom in Silver Spring.) What happens when rents have risen as well as interest rates and prices haven't "busted" but instead started slowly rising again? Simply, like most people who gamble, he now has less than he had when he started off. The greed of making quick bucks can make people do terrible things to themselves and their families.

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  67. Lance said...
    “Shane,

    Robert sold his house a few years ago with the expectation of "making money" by renting for a few years and then buying back a similar house later at post-bubble prices."

    Shane, let me fill you in . I sold in 05’ due to a job change. Not with the intention of “making money”. In my case, the job changed matched favorably with the housing market.

    “Someone owns that place you are renting and they have to pay to own it AND make a profit on it.”

    Landlords do not “have” to make profit on their rental unit. It’s called “feeding the alligator.”

    “So what happens to Robert and his family when prices never fall to the levels he has said would convince him it was time to buy again. (for example, $140,000 for a one-bedroom in Silver Spring.) What happens when rents have risen as well as interest rates and prices haven't "busted" but instead started slowly rising again? Simply, like most people who gamble, he now has less than he had when he started off. The greed of making quick bucks can make people do terrible things to themselves and their families.”

    Couple of things here “Lance”. The example of the $140K 1B in Silver Spring, I said it was worth $0 to me, not $140K, it was not a prediction of price drops. Second, YOY prices are down, I now can buy a comparable home for less than if I would have bought last year, and inventory continues to grow. “Lance”, you think more rentals on the market mean higher rents? Please explain.

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  68. robert said:
    "Landlords do not “have” to make profit on their rental unit. It’s called “feeding the alligator.”

    Gotta luv this quote! That's right Robert, landlords are in it for the charity aspect of it all! Losing money to provide you with housing is just their "good deed" for the day!

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  69. "Losing money to provide you with housing is just their "good deed" for the day!"

    Nope, it's a renter's good fortune at the expense of someone who was dumb enough to listen to Lance in 05.:)

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  70. Lance said...
    robert said:
    "Landlords do not “have” to make profit on their rental unit. It’s called “feeding the alligator.”

    -Gotta luv this quote! That's right Robert, landlords are in it for the charity aspect of it all! Losing money to provide you with housing is just their "good deed" for the day! –

    “Lance”, do you guarantee that all landlords are making a profit on rentals? Revenue on rentals have kept pace with housing prices? If that were the case, there would be absolutely no reason for foreclosures (much less an increase in them). Once homeowners/sellers found themselves in dire straights they could just place the home on the market as a rental and avoid foreclosure altogether.

    Locally, I’ve seen a spike in rental inventory. Many of those rentals are fairly new builds (05’-06’). Clearly, as seen by the asking prices for these rentals, the landlords are trying to make the rent cover the mortgage. Local rental inventory/demand does not support those kinds of prices and they are languishing on the rental market. Whether for charity reasons, good deeds, or poor planning, these landlords are not making a profit.

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  71. “Lance”, check this out:

    http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060807/BUSINESS/608070439/1438


    "Instead of making money, landlords will see money going out." Holmes said. "It's called an alligator, and it will eat you every month.”

    Landlords not making a profit? How is this possible “Lance”?

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